Poland Monetary Policy

Poland: NBP again keeps reference rate at record low of 1.50%

November 5, 2015

The National Bank of Poland (NBP) decided to keep its reference rate at the record low of 1.50% at its 3–4 November monetary policy meeting. The decision matched market expectations and marked the sixth consecutive time the NBP has left the rate unchanged.

In its accompanying statement, the NBP reaffirmed that the global economy is growing moderately. According to the Bank, the Euro area is continuing to recover steadily. Meanwhile, despite a slowdown in Q3, the U.S. economy is expected to keep recovering at a healthy pace in the next quarters. In contrast, China’s economic performance continued to deteriorate and Russia and Brazil are still in recession. Consequently, concerns over weaknesses in developing countries and thus uncertainty regarding global demand remain significant.

On the domestic front, the Bank commented that, “stable economic growth continues, driven mainly by domestic demand. The growth in demand is supported by robust labour market, strong consumer confidence, improvement in financial standing of enterprises as well as by stable lending growth. On the other hand, demand in the economy is adversely affected by uncertainty facing firms regarding the outlook for global growth.”

The Bank stated that inflationary pressures are muted in the economy due to moderate growth in demand and a continuing negative output gap. Low commodity prices and moderate nominal wage growth are contributing to the lack of cost pressure, and, consequently, inflation expectations remain subdued.

Finally, the Bank commented that, “price growth will slowly increase in the nearest quarters, supported by the gradual closing of the output gap amid improving economic conditions in the euro area and favourable domestic labour market developments. At the same time, the risk of a sharper slowdown in the emerging economies and the impact this may have on global economic activity, as well as the possibility of commodity prices persisting at low levels, and as a result, low inflation in the environment of the Polish economy, remain the source of uncertainty about the pace of inflation returning to the target.”

FocusEconomics Consensus Forecast panelists expect the policy rate to end 2015 at 1.51%. For 2016, the panel sees the rate ending the year at 1.99%.